Typically, consumers choose to pay for purchases by credit card. An issuer of the credit card actually is lending money to the cardholder to be paid to a business person or merchant. In most cases, a credit card is swiped through a machine known as reader. If the card issuer approves the transaction, an acquiring bank, which receives credit card transactions from the merchant, then credits the merchant's account. The merchant pays the acquiring bank a fee for processing the transaction. Once approved, the card issuer posts the transaction to the customer's account. At the end of the billing period, the cardholder receives a monthly statement from the issuer, at which time payment must be made.
Swiping the credit card through a machine at the point of sale allows the information from the magnetic stripe on the back of the card to be read. The machine transmits the credit card data to the bank that issued the card in order to verify that the account exists. If there is enough credit in the account to cover the sales transaction, the issuing bank generates an authorization code, and then places a hold on the cardholder's account for the amount of the sale.
In addition to a credit card company (e.g. Visa®, MasterCard®, Discover®, American Express®) there are two banks involved in most credit card transactions—the acquiring bank that handles the merchant's credit card account and the bank that issued the credit card. Information is passed among these three organizations quickly in order for a credit card transaction to be processed successfully.
All authorized credit card transactions are stored in batches and submitted to the acquiring bank at the end of each day. The acquiring bank then sends the transactions through the credit card association, which debits the card issuer for payment and credits the acquiring bank. Once the card issuer pays the acquirer, the acquirer pays the merchant. The acquiring bank deposits the amount of any sales drafts submitted by the merchant into the merchant's bank account.
Credit cards typically use magnetic stripes to store large amounts of data relating to a user. The data includes, but is not limited to, personal information (name, address, telephone numbers, and other data), sensitive information (bank account, credit, or other sensitive numbers like social security data), and security and format features. The magnetic stripes can have three separate tracks that can store around one hundred bytes of data. To process the data stored in the magnetic stripes, a card reader reads the tracks on the magnetic stripes using a read head and processes the data based on universal specifications and formats that apply to the magnetic stripe cards.
Many card readers include integrated chips for processing. The read head typically sends analog signals associated with the data stored on the magnetic stripes to the analog chip, which can have a feature of converting the analog signals to digital signals. The analog chip sends the converted digital signals to the digital chip, which can include a microprocessor that can process the digital signals for transmission to a host device, such as a personal computer, a personal device assistant, a smartphone, and a server. In today's market, gadgets are becoming smaller and more energy efficient.
Desirable in the art is an improved card reader that would improve upon the conventional card readers.